Schwab Pursues Nebraska Broker Who Went Independent

Charles Schwab & Co. has filed another lawsuit in an attempt to block a departing broker from contacting former clients.

The San Francisco-based discount brokerage pioneer, which has been moving into full-service advice, on Friday asked a federal court in Nebraska to issue a preliminary injunction against David Joseph Spiess.

The advisor had spent his entire 22-year brokerage career with Schwab before resigning on August 16 to start his own investment firm, according to a complaint filed in U.S. District Court for the District of Nebraska, Omaha Division.

Spiess, whose BrokerCheck record does not yet record his departure from Schwab, did not respond to requests for comment. The Schwab complaint does not name the business he reputedly is starting.

The preliminary injunction seeks to prevent Spiess from allegedly using “trade-secret information” to call clients, pending the outcome of a Finra arbitration that Schwab concurrently filed against him. The arbitration complaint seeks damages and a permanent injunction, according to the court filing.

The suit is the latest indication of discount brokers and independent advisory firms picking up the litigation baton largely abandoned by large, full-service firms such as Merrill Lynch and UBS Wealth after creation of the Protocol for Broker Recruiting in 2004. The pact allows brokers to take limited customer-contact information with them if they join other signatory firms.

Morgan Stanley and UBS almost two years ago pulled out of the Protocol, saying it had lost its value now that thousands of smaller firms are members. Morgan Stanley has subsequently sued over a dozen brokers, with mixed success.

Schwab filed its Nebraska claim three days after suing John A. VanEngelenhoven, a Texas broker who left after 14 years to open a registered investment advisory firm. A week earlier, Schwab sought an injunction against a former broker in Wisconsin who joined a bank-owned broker-dealer after 12 years with the firm. And in July, it sued a New Orleans broker who set up an independent practice after working for a decade at Schwab.

The three earlier cases, which similarly cite trade-secret abuse and contract violations, are pending, according to court records.

“My guess would be that Schwab is just trying to send a message to the remaining brokers that if you go it is not going to go down easy,” said Rogge Dunn, a Dallas plaintiffs’ lawyer who often represents brokers in employment law cases. “It could be that Charles Schwab is experiencing a brain drain.”

“If it becomes necessary, Schwab will not hesitate to enforce those obligations in a court or arbitration proceeding,” he wrote in an e-mailed statement.

Friday’s complaint cited multiple examples of customers who allegedly said Spiess called them before and after he resigned. That contrasts with the earlier July and August lawsuits, which referenced just one or two clients who said they had been solicited.

Fidelity Investments and registered investment advisory firm Mercer Advisors have also brought restraining order requests against former advisors. Schwab, Fidelity and Mercer are not Protocol signatories.

The firms underscore in their filings that their full-service brokers get their referrals internally from colleagues servicing self-directed investors who are likely to welcome more advice. That contrasts with brokers at traditional full-service firms who build their books through cold-calling and personal contacts, according to the lawsuits.

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“All of us, generally speaking, are free to move from job to job, but what we cannot do is stuff our pockets on the way out the door,” U.S. Attorney David Anderson said at a press conference in San Jose.